Key Takeaways
- Israel’s Finance Ministry is advancing a new bill to tax e-cigarettes, tobacco pouches and nicotine pouches.
- The report says the measure would only require Finance Minister Bezalel Smotrich’s signature after Finance Committee approval.
- The proposal would set the vape liquid tax at 1 shekel per milliliter, the vape device tax at 10 shekels per unit, and the tobacco and nicotine pouch tax at about 350 shekels per kilogram, equal to about USD 0.33, USD 3.32 and USD 116.34 respectively at the April 21, 2026 exchange rate of 1 USD to 3.0085 ILS.
- The Israel Tax Authority has published the draft law and opened it for public comments.
- The report says one of the reform’s goals is to fight the vape black market by changing the balance of taxation between devices and liquids.
2Firsts, April 22, 2026
According to the report, Israel’s Finance Ministry is advancing a new bill that would impose taxes on e-cigarettes, tobacco pouches and nicotine pouches.
The bill could take effect after Finance Committee approval and the minister’s signature
The report says that after approval by the Knesset Finance Committee, the initiative would only require the signature of Finance Minister Bezalel Smotrich to enter into force. The Israel Tax Authority has already published the draft bill and announced that it is accepting public comments.
The proposal would restructure vape taxation
Under the draft, the tax would be 1 shekel per milliliter of vape liquid, 10 shekels per vape device and about 350 shekels per kilogram of tobacco and nicotine pouches. At the April 21, 2026 exchange rate of 1 USD to 3.0085 ILS, those amounts are about USD 0.33, USD 3.32 and USD 116.34 respectively.
The report also says the government is proposing to lower the tax on vape liquid while introducing a levy on the new category of tobacco pouches.
The finance minister could move the measure through an accelerated procedure
According to the report, once the finance minister signs the order, it could take effect through an accelerated process without going through the full three-reading legislative route.
This is possible because the finance minister has authority to set tax rates, similar to what happened recently in relation to VAT exemption rules for personal imports. The only condition for implementation is approval by the Knesset Finance Committee.
If the committee objects, the plenary could vote to cancel the order
The report says that if members oppose the order at committee level, a simple majority vote in the Knesset plenary would be required to cancel the minister’s order. It adds that parliament previously acted in this way in relation to an order raising the VAT exemption threshold for personal imports.
The reform is intended to strengthen control and fight the black market
The report says the law would also strengthen oversight of e-cigarette taxation. This part had previously been removed from an economic regulation bill because it was not directly linked to the state budget. It will now be considered separately by the Knesset Finance Committee after the minister signs the order.
A professional committee recommended treating the device and liquid as a single taxable whole
According to the report, the government is advancing a significant restructuring of taxation on e-cigarettes and newer smoking products following the conclusions of a professional committee and a government decision. Until now, tax policy for e-cigarettes has focused mainly on the liquid, in parallel with conventional cigarettes and roll-your-own tobacco.
However, the committee concluded that the e-cigarette is an independent product and that the liquid is not its main component, either in production cost or in use. It therefore recommended treating the tax as applying to the device and liquid together and then adjusting the rates accordingly.
Lowering liquid tax while adding a device tax is presented as a way to bring sellers back to the legal market
The report says one purpose of the reform is to eliminate the black market. The high tax on vape liquid that existed until now had pushed many market participants to break the law or operate in a gray zone. The government believes that lowering the liquid tax while imposing a tax on the device would allow law-abiding traders to return to the legal market and improve overall compliance.
Image source: Vesty
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